Bill would let DEED do more than lend

STATE EQUITY?

March 02, 1992|By David Conn | David Conn,Annapolis Bureau

ANNAPOLIS -- For years the Senate Budget and Taxation Committee has harped on Maryland's economic development leaders for throwing money at private companies without any hope of a return on investment.

Now, Maryland has a plan to restore hope. A bill before the House Economic Matters Committee last week would allow the Department of Economic and Employment Development to make equity investments in businesses, not just loans and grants.

The program would be geared especially toward DEED's technology challenge grants, a four-year-old program that provides up to $50,000 in matching grants to promising start-up companies.

If the grant recipient ultimately flourishes, DEED Secretary Mark L. Wasserman explained to the committee, "we ought to have the opportunity to recoup our investment at some later stage."

"It breaks a bit of some new ground," he said, "but then, so do the technology challenge grants."

The Senate committee might applaud this approach, but some of the delegates were wary. "If you hit a jackpot you could probably make a whole lot of money," pointed out Del. Robert Kittleman, R-Montgomery. "You'd be the biggest investment banker in the state."

If some observers felt that protectionism was a good way to describe House Bill 1314, which would put restrictions on manufacturers' dealings with their Maryland distributors, they should take a look at House Bill 854.

The bill, which has failed in two prior years, would reduce the state tax burden on companies that are based in Maryland but that sell elsewhere. That means that companies that have a lot of sales in Maryland, but not much property or people, would be taxed more, while the Black & Deckers and McCormicks would pay less.

Currently, companies calculate their taxes by figuring how much of their nationwide sales, property and personnel are in Maryland, and then applying a formula that gives equal weight to all three factors.

HB 854 would double the weight given to the sales factor. And that would increase the taxes paid by most national manufacturers and retailers that aren't based in Maryland.

"Our corporations are disadvantaged in 21 other states" that already have the "double-weighted sales factor" law in place, said Del. Gene W. Counihan, D-Montgomery, who co-sponsored the bill.

The business community appears to be split. DEED Deputy Secretary Joel Lee said his department, which sat on the fence the last two years, now supports the bill because it "rewards companies that have a great investment of both employment and capital in the state of Maryland." And Donald P. Hutchinson, chairman of the Chamber of Commerce, testified in favor.

But Thomas Saquella, director of the Maryland Retail Merchants Association, said the chamber's legislative committee was split on the issue, and Mr. Hutchinson had to break the tie.

The retail merchants oppose the measure, partly for fear that other states will respond by upping the ante: instead of double-weighting the sales factor, they may triple-weight it next year, Mr. Saquella warned.

But with two-thirds of the House Ways and Means Committee on board as co-sponsors (the Senate passed it last year), Mr. Saquella all but acknowledged the legislation will fly this year.